Billionaire Insights: A Tale of Two Tech Giants
The third quarter saw two tech behemoths, Nvidia and Apple, experience divergent fortunes in the portfolios of billionaire investors. Cliff Asness of AQR Capital Management and Steven Cohen of Point72 Asset Management made significant moves, shedding light on their market expectations.
Nvidia: The AI Powerhouse
Nvidia has solidified its position as the foundation of the artificial intelligence (AI) boom. Its graphics processing units (GPUs) dominate data center workloads, with an impressive 80% market share in AI accelerators. The secret to Nvidia’s success lies not only in its superior chip performance but also in its comprehensive CUDA software platform. This ecosystem provides hundreds of code libraries and pretrained models, streamlining AI application development across various use cases.
A Dominant Position
Nvidia’s exceptional financial performance in the third quarter of fiscal 2025 saw sales soar 94% to $35 billion, with non-GAAP net income jumping 103% to $0.81 per diluted share. This marks the sixth consecutive quarter of triple-digit earnings growth. Wall Street expects adjusted earnings to increase 50% in the next 12 months, making the current valuation of 54 times adjusted earnings appear relatively affordable.
Apple: Brand Authority and Pricing Power
Apple’s competitive advantage lies in its brand authority, which translates to pricing power. The average iPhone sold for over $900 in the third quarter, while the average Samsung Android phone sold for less than $300. Apple dominates smartphone sales and ranks second in shipments. Its strong position extends to other consumer electronics verticals, including PCs, smartwatches, and tablets.
Services and Subscriptions
Apple monetizes its devices and generates higher-margin revenue through services like App Store downloads, iCloud storage, and Apple Pay, as well as subscriptions like Apple TV+. The App Store is the top-ranked mobile app store by revenue, and Apple Pay is the most popular in-store mobile wallet among U.S. consumers.
Financial Performance
Apple reported decent financial results in the fourth quarter of fiscal 2024, narrowly beating estimates on the top and bottom lines. Total sales increased 6% to $95 billion, with revenue in the iPhone and services categories rising 6% and 12%, respectively. Non-GAAP earnings rose 12% to $1.64 per diluted share. However, Wall Street expects Apple’s adjusted earnings to increase only 10% over the next 12 months, making the current valuation of 36 times adjusted earnings appear expensive.
Billionaire Insights: A Buying Opportunity
Billionaire investors like Cliff Asness and Steven Cohen are buying Nvidia and selling Apple. With Nvidia’s dominance in AI accelerators and its exceptional financial performance, it presents a compelling buying opportunity. In contrast, Apple’s expensive valuation and slower earnings growth make it less appealing. Prospective investors may want to consider trimming their Apple positions and exploring Nvidia as a more attractive option.
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